The issue of whether an employee is exempt from overtime pay or must be paid overtime for hours worked over weekly or daily thresholds (non-exempt) is a critical one for any business.

Many employers believe that putting employees “on salary” makes it unnecessary to pay overtime to that employee. Many small and start-up companies make this mistake. Improperly classifying an employee as exempt from overtime can lead to significant legal liability in the form of double or even in some states triple damages for unpaid overtime and the payment of the employee’s attorney fees as well.

The exemptions from the obligation to pay overtime are narrow and the employee must satisfy two tests: the duties test, do they perform exempt duties, and the salary test, are they paid on a salary basis at a minimum rate.